Denton County offices will be closed on Monday, May 29th in observance of Memorial Day
 
 

Auditor/Accounts Payable

FY2001 Annual Financial Report

FY2001 Reports

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Major Sections of the Financial Report:



January 15, 2002

THE HONORABLE DISTRICT JUDGES AND

THE HONORABLE COMMISSIONERS' COURT

Ladies and Gentlemen:

In compliance with the statutory duties of the County Auditor as prescribed by Section 114.025 of the Local Government Code of the State of Texas, the Comprehensive Annual Financial Report of Denton County, Texas, for the fiscal year ended September 30, 2001 is submitted herewith.  The report was prepared by the County Auditor's Office. 

Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the County.  To the best of our knowledge and belief, the enclosed data are accurate in all material respects and are reported in a manner designed to present fairly the financial position and results of operations of the various funds and account groups of the government.  All disclosures necessary to enable the reader to gain an understanding of the government's financial activities have been included.

The comprehensive annual financial report is presented in four sections: introductory, financial, statistical and single audit.  The introductory section includes this transmittal letter, the county's organizational chart and a list of principal officials.  The financial section includes the general-purpose financial statements and the combining and individual fund and account group financial statements and schedules, as well as the independent auditor's report on the financial statements and schedules.  The statistical section includes selected financial and demographic information, generally presented on a multi-year basis.

The county is required to undergo an annual grant single audit in conformity with the provisions of the Single Audit Act of 1984 and U.S. Office of Management and Budget Circular A-133, Audits of State and Local Governments.  Information related to this single audit, including schedules of federal and state financial assistance, findings and recommendations, and independent auditor's reports on the internal control structure and compliance with applicable laws and regulations, is included in the single audit section of this report.

This report includes all of the funds and account groups of the County, including all activities considered to meet the entity definition criteria of Governmental Accounting Standards Board Statement 14. Additional information relative to the inclusion or exclusion of certain entities is provided as a part of the notes to the financial statements in the financial section of this report.

The County provides a full range of services authorized by statute.  Such services include general governmental functions such as recording and licensing, maintaining the county and district court systems, maintaining public facilities, ensuring public safety, maintaining public health and welfare, aiding conservation, and maintaining county roads and bridges.

 

ECONOMIC CONDITION AND OUTLOOK

Denton County is located in the north central part of Texas.  With over 430,000 citizens, it is the eighth most populous county in the state.  Major cities in the County include Denton, the county seat, Lewisville and Carrollton.  Denton County's many advantages include climate; access to transportation centers; a young, skilled workforce and its educational facilities.

While population growth has slowed somewhat from the extreme levels of the late 1980's, Denton County continues to experience strong growth in population and in its economic base.  The population has grown by 58% since the 1990 census.  During the same period, the County's tax base increased from $10.3 billion in 1990 to over $22 billion in 2001.

Job additions have continued in the last year in both manufacturing and service industries. Our September 2001, unemployment rate of 3.20% compared favorably with the 5.0% statewide rate and the 5.0% national rate.  During the 2001 year, the County had over $1.7 billion in new property added to the tax rolls.  This is the highest amount of new construction in the County ever in one year.  In 2001, for the fifth straight year, over 4,000 new housing starts were recorded in the County.

The economic outlook for Denton County continues to remain very positive for the near future.  Alliance Airport, which is the largest industrial airport in the world, continues to attract new transportation, distribution, and manufacturing tenants.  Construction of a major distribution center in Sanger by Wal-Mart was finished during the year.  This new center is expected to add over 600 new jobs to the local economy.  Texas World Speedway, located near the airport, was opened during 1997.  Its major events continue to attract large crowds from all parts of the state and the nation.   Robson Development is constructing one of the nation’s largest new communities for retired citizens in the southern portion  of the County.   Other large housing developments in all areas of the county are proceeding with construction.  Sysco Foods, a major food distributor has also recently announced a relocation to the County with a planned investment in facilities of over $33 million. Denton=s two universities continue to turn out a large number of skilled graduates each year.  This labor supply, combined with air, rail and highway transportation centers, adds assurance to the County’s continued economic growth.

 

MAJOR INITIATIVES

For the year

As in past years, the County emphasized three primary areas in its efforts to provide the services and facilities that its citizens demand.  Efforts in these areas included providing adequate facilities for County business; improving the working environment for its workforce; and improving the transportation system in the County.

County Facilities

The growing population in the County demands an ever-increasing amount of services from the County.  To assure that services are readily available to all citizens, the upgrade and expansion of facilities has been a priority in the recent past.  In 2001, the County completed a project to add office and records storage space and to finish two courtrooms in the Denton County Courts Building.  Work has continued throughout the year on a $19 million expansion of our Detention Facility.   The County also acquired during the year  a building which had previously housed a food store.   This new facility will be remodeled into needed additional office space in the future.   In order to add more structure to the process of expanding our facilities, the County commissioned a space study and a facilities master plan during 2001.  The plan, when finished in mid-2002, will give the County a blueprint to follow in providing adequate, well-located facilities for county business.

Working Environment

The primary accomplishment in enhancing the work environment in 2001 was a concerted effort by County leaders to assure that salaries and benefits for County employees were enhanced and were competitive.  A compensation consultant was hired during the year to study and offer solutions to internal pay equity problems.   The County conducted salary surveys with similar sized employers to determine appropriate levels of compensation for employees.  A non-binding referendum, which was approved, was placed before the voters in November 2000 to gauge public support for an increase in employee compensation.   These efforts culminated during the budget workshops for fiscal 2002 when a decision was reached to grant salary increases averaging 14% to County employees.  Also, retirement system benefits were significantly increased during the budget workshops.   These increases will take effect in January, 2002.

Transportation

In 2001 the County continued to utilize the proceeds of several bond issues to improve and safeguard the transportation system in the County.  Numerous county, city and state road improvement projects were funded during the 2001 fiscal year. The County’s goal in these transactions is to leverage voluntary participation by the County to accelerate the construction of vital city, state and federal roadways.   Also, the County finalized a transaction with the State Infrastructure Bank for  $10 million in funding to be used to initiate a $140 state project to enhance State Highway 121, a primary traffic artery in the southern part of the county.   This financing includes agreements with cities affected by SH 121 to provide funds to repay the County’s debt on the $10 million, and the County will also seek federal reimbursement on funds expended. This financing is the first of its kind by a county government in the state.

For the Future

Functional efficiency in County operations will be emphasized in the near future.  An energy management program with an outside vendor was completed in 2001.  This program  upgraded the energy systems in all County facilities.   Savings in utility costs will more than offset the cost of the improvements.   Also, an additional county criminal court and a county civil court will be activated in 2002 to provide better, faster access to the courts system to our citizens.

Other areas that will receive special emphasis in the near future include the transportation system, computer software management and the potential opening of the new detention facility.

Departmental Focus

Each year Denton County focuses attention on the efforts and accomplishments of a selected department.  This year, the Tax Assessor-Collector’s Office has been selected for this purpose.

The Tax Assessor-Collector employs 48 full-time employees.  Functions of the office include collecting property taxes, collecting motor vehicle and boat sales taxes, processing motor vehicle registrations and title transfers, issuing alcoholic beverage sale licenses, collecting and disbursing motor vehicle inventory taxes and maintaining the delinquent tax rolls.    Through interlocal agreements, the County Tax Assessor-Collector also collects property taxes for over 35 other government entities in the county.  

The County Tax Assessor-Collector’s office is known for its innovative techniques and efficient operations.   Collection percentages for all entities consistently reach the 98% level each year.   The department installed a totally new vehicle registration system in the recent past which has improved efficiency and maintained tight internal controls over collections.  In the past year, the Tax Assessor-Collector has implemented Internet-based vehicle registrations as well as telephone and Internet payment systems for property taxes. The department has increased the number of outside entities for which it collects property taxes from 5 to over 35 in the last eight years with no significant increase in expense to the County.



FINANCIAL INFORMATION

Management of the County is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the government are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles.  The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met.  The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management.

Single Audit

As a recipient of federal and state financial assistance, the county also is responsible for ensuring that an adequate internal control structure is in place to ensure compliance with applicable laws and regulations related to those programs.  This internal control structure is subject to periodic evaluation by management and the internal audit staff of the County.

As a part of the County's single audit, described earlier, tests are made to determine the adequacy of the internal control structure, including that portion related to federal financial assistance programs, as well as to determine that the government has complied with applicable laws and regulations.  The results of the county's single audit for the fiscal year ended September 30, 2001 provided no instances of material weaknesses in the internal control structure or significant violations of applicable laws and regulations.

Budgetary Controls

In addition, the County maintains extensive budgetary controls.  The objective of these budgetary controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the Commissioners Court.  Activities of the general fund, special revenue funds and debt service fund are included in the annual appropriated budget.  Project length financial plans are adopted for the capital projects funds.  The level of budgetary control (that is, the level at which expenditures cannot legally exceed the appropriated amount) is established at the expenditure object level. The County also maintains an encumbrance accounting system as one technique of accomplishing budgetary control.  Encumbered amounts lapse at yearend.  However, outstanding encumbrances generally are reappropriated as part of the following year's budget.

As demonstrated by the statements and schedules included in the financial section of this report, the County continues meeting its responsibility for sound financial management.

General Governmental Functions

The following schedule presents a summary of General Fund, Special Revenue and Debt Service fund revenues for the fiscal year ended September 30, 2001 and the amount and percentage of increases and decreases in relation to prior year revenues.

 

 

 

Increase

Percent

 

 

Percent

(Decrease)

of Increase

Revenues

Amount

of Total

From 2000

(Decrease)


Taxes  

$54,150,614

60.45%

$8,149,296

17.72%

Licenses and Permits

6,137,941

6.85%

468,752

8.27%

Intergovernmental 

13,818,195

15.43%

4,871,691

54.45%

Fees of Office 

8,726,026

9.74%

796,485

10.04%

Fines 

3,248,336

3.63%

25,161

0.78%

Interest

1,720,095

1.92%

(211,096)

-10.93%

Miscellaneous

1,776,170

1.98%

7,341

0.42%

 

 

 

 

 



$89,577,377

100.00%

$14,107,630

18.69%

The largest percentage increases in governmental revenue were in intergovernmental revenues, taxes and fees of office.  Increases in prisoner housing fees, state grants and federal grants accounted for the increase in intergovernmental revenues. Although the County increased its  tax rate only slightly over its effective tax rate, more revenue was received due to growth in the County's tax base that totaled almost $1.7 billion, and due to a high percentage of taxes collected.   Fees increased due to a growing demand for county services by its growing citizenry.

The only revenue type to decline was interest revenue.  This decline was primarily due to lower interest rates on deposits and investments as a result of the weakening national economy.

The following schedule presents a summary of General Fund, Special Revenue, and Debt Service fund expenditures for the fiscal year ended September 30, 2001, and the percentage of increases and decreases in relation to prior year amounts.

 

 

 

Increase

Percent

 

 

Percent

(Decrease)

of Increase

Expenditures

Amount

of Total

From 2000

(Decrease)


General Government

$10,756,812

12.06%

$1,931,800

21.89%

Judicial

9,908,240

11.11%

1,166,058

13.34%

Legal

6,605,484

7.41%

648,099

10.88%

Financial

3,262,723

3.66%

361,781

12.47%

Public Facilities

5,493,845

6.16%

836,570

17.96%

Public Safety

30,207,445

33.88%

4,214,603

16.21%

Health and Welfare

4,627,493

5.19%

201,077

4.54%

Conservation

308,440

0.35%

52,486

20.51%

Contract Services

2,457,578

2.76%

76,301

3.20%

Roads

6,190,111

6.94%

360,856

6.19%

Debt Service

9,351,347

10.49%

836,797

9.83%

 

 

 

 

 



$89,169,518

100.00%

$10,686,428

13.62%

Spending increases continue to correlate strongly with increased demands for County services.  Salary increases averaging 8% were granted to County employees for 2001. The large dollar increase in spending in the General Government was due to the salary increases, additional personnel budgeted and to attorney fees for legal defense.  A lawsuit with Tarrant County over the south Denton County border generated most of the additional legal fees.   The large dollar increase in spending for Judicial was due to the addition of one county criminal court and to the lease purchase of a computer system upgrade. Salary increases accounted for most of the large dollar increase in spending in the Public Safety departments.

Fund Balances

The County was able to maintain year-end fund balances at adequate levels for efficient County operations.  The General Fund balance decreased by $233,107 to $5,093,649.  Special Revenue Fund balances decreased $614,977 to $9,191,380 and Debt Service Fund balances increased by $1,827,268 to $2,904,913.

Debt Administration

At September 30, 2001 Denton County had fourteen debt issues outstanding.  The outstanding balance of the issues totaled $123,242,570 in general obligation bonds and $16,170, 000 in tax notes.  The County's bond rating was upgraded in 1998 to AA by Standard and Poors, and it was upgraded in 1996 by Moody's to a bond rating of Aa2.  According to the Constitution of the State of Texas, Denton County's outstanding bonded debt is limited to an amount not exceeding 25% of the assessed taxable value of real property in the County.  As of the current fiscal year-end, the County was well below the legal limit of approximately  $5 billion.

During the 2001 fiscal year, the County completed three new debt issues.  These included $24 million in general obligation bonds to improvements to the county and state road system, $1.85 million of tax notes to fund the purchase of a building and to fund further renovation  to County Courts Building, and $10 million in tax notes to fund engineering services to expedite the expansion of state highway 121 into a major thoroughfare.  At year-end, the County had $5.145 million of authorized but unissued general obligation bonds from a 1991 road bond election and $36.8 million of authorized but unissued general obligation bonds from its 1999 road bond election.

Cash Management

Cash temporarily idle in the various funds of the County is invested in bank certificates of deposit or is invested in a money market account operated by the State Treasurer.  Interest rates on bank deposits are governed by the County's depository contract, which is awarded for four-year periods to the best bidder.  The interest rate on the current contract is equal to the yield of Treasury Bills of comparable maturity. Total interest earned on deposits and investments of County funds was $4,459,305 for fiscal 2001.

The primary objectives of the County's investment policy are the safety of principal followed by liquidity and yield.  Accordingly, deposits were either insured by federal depository insurance or collateralized with securities pledged to the County and held by an independent third-party financial institution.

Risk Management

Denton County provides for the management of risks through a combination of self-insurance and traditional insurance.  In addition, the County has instituted a number of risk and loss control techniques such as the hiring of a risk manager, safety training, accident investigation and mandatory defensive training for employees who operate County vehicles.  The County currently has traditional insurance for property damage, automobile liability, some professional liability and general liability. Other risks are either self-insured or uncovered.

 

OTHER INFORMATION

Independent Audit

While state statutes do not require an annual audit by independent certified public accountants, Denton County has followed the policy of having an annual independent audit of its financial records.  This policy has been continued for fiscal year 2001, with the engagement of the firm of Pattillo, Brown and Hill.  The audit was designed to meet the requirements of the federal Single Audit Act of 1984 and related OMB Circular A-133.  The auditor's report on the general-purpose financial statements and combining and individual fund statements and schedules is included in the financial section of this report.  The auditor's reports related specifically to the single audit are included in the single audit section.

Awards

The Government Finance Officers Association of the United State and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to Denton County for its comprehensive annual financial report for the fiscal year ended September 30, 2000.  This is the thirteenth consecutive year that the County has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards.  This report  must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only.  We believe our current report continues to meet the Certificate of Achievement Program’s requirements, and we are submitting it to GFOA to determine its eligibility for another certificate.

In addition, Denton County also received the GFOA's Award for Distinguished Budget Presentation for its annual appropriated budget dated October 1, 2000.  In order to qualify for the Distinguished Budget Presentation Award, the government's budget document was judged to be proficient in several categories including policy documentation, financial planning and organization.

Acknowledgments

The publication of this comprehensive annual financial report is tangible evidence of the talent and dedication of the entire staff of the Denton County Auditor's office.  The other areas of their work reflect the same striving for excellence.  We would like to extend our thanks to the Budget, Human Resources, Purchasing and Treasurer's departments for their assistance with this report as well as for their assistance and cooperation throughout the year.

 

Sincerely,

James A. Wells, CPA
Denton County Auditor